(The following statement was released by the rating agency)
LONDON/ISTANBUL, April 18 (Fitch) Fitch Ratings has affirmed the
Long-term (LT)
foreign currency Issuer Default Ratings (IDR) of Turkey's
Finansbank A.S. and
Denizbank T.A.S. at 'BBB-' and of Turk Ekonomi Bankasi A.S.
(TEB) at 'BBB'. The
ratings have a Stable Outlook. At the same time, the agency has
upgraded TEB's
Viability Rating (VR) to 'bbb-' from 'bb+', reflecting
improvements following a
merger process in 2011. A full list of rating actions is below.
KEY RATING DRIVERS - IDRS AND NATIONAL RATINGS
The three banks are second-tier Turkish institutions, majority
owned by foreign
shareholders. Finansbank's and Denizbank's IDRs are driven by
their intrinsic
financial strength, as reflected by their 'bbb-' VRs.
Denizbank's IDRs are also
underpinned by potential support from the bank's owner, Sberbank
of Russia
(BBB/Stable/bbb).
TEB's IDRs are driven by potential support from its majority
shareholder, BNP
Paribas (BNPP; 'A+'/Stable). The 'BBB' Long-term foreign
currency IDR is capped
at the Country Ceiling, and the 'BBB+' Long-term local currency
IDR also takes
into account country risks.
The 'AAA(tur)' National Ratings of all three banks reflect the
agency's opinion
that, on a relative scale, these issuers have some of the best
credit profiles
in Turkey.
RATING SENSITIVITIES - IDRS AND NATIONAL RATINGS
TEB's IDRs could be upgraded or downgraded if there were changes
to Turkey's
Country Ceiling. The ratings could also be downgraded if there
was a multi-notch
downgrade of BNPP, or a sharp reduction in the parent's
commitment to the
subsidiary, neither of which is currently anticipated by Fitch.
Denizbank's IDRs could be upgraded if the bank's VR was upgraded
or the
Long-term IDRs of Sberbank of Russia were upgraded. Denizbank's
IDRs could be
downgraded if both the VR was downgraded and Sberbank's
Long-term IDRs were
downgraded.
Finansbank's IDRs are sensitive to any change in the bank's VR.
KEY RATING DRIVERS - VRs
Finansbank and Denizbank's VRs are supported by their solid
credit metrics,
reflected in adequate capital levels, sound risk management and
credit
underwriting capabilities, solid profitability, expanding
franchises and stable
deposit funding. However, the ratings also take into account
risks resulting
from quite rapid recent and ongoing growth, and the fact that
loan books will
season in an environment of slower economic growth.
Finansbank's VR also reflects Fitch's view that contagion risks
from its 95%
ownership by National Bank of Greece ('CCC'/'f') are low.
Despite Greece's
protracted and severe economic crisis, Finansbank has suffered
no deposit
outflows, reputation damage, loss of franchise or loss of market
access. Asset
exposures to NBG, or Greece more generally, are negligible, and
funding from NBG
is also limited. Any re-escalation of the Greek crisis is
unlikely to have a
direct negative impact on Finansbank's ratings.
The upgrade of TEB's VR reflects improvements in the bank's
credit profile
following the merger with Fortis Bank A.S. in February 2011.
Following steps
taken by management, significant improvements have been achieved
in both
efficiency and funding self-sufficiency, adding to the
strengthening of the
franchise resulting from the merger. Most of TEB's standalone
credit metrics are
now broadly in line with those of Finansbank and Denizbank.
Key credit metrics for all three banks remain sound. Net
interest margins, in
excess of 5% at all three banks, are especially high at
Finansbank (6.8%),
reflecting a higher share of retail business. Profitability is
robust, with
operating returns on assets ranging from 1.6% to 2.2% in 2012.
Loan quality is varied, with impaired loans representing just
2.2% of total
loans at TEB, slightly higher at Denizbank (3.6%), and a high of
6.3% at
Finansbank. This reflects the different business mixes at the
banks, with
corporate lending comprising a larger part of the portfolio at
TEB, Denizbank
more middle market/SME-focused and Finansbank targeting retail
segments. In
addition, Finansbank makes very few write offs and, unlike some
other Turkish
banks, it sells a negligible amount of impaired loans.
Funding at each of the banks is sourced primarily from customer
deposits.
However, wholesale funding is also significant, with
loans/deposit ratios at
end-2012 of 123% at Finansbank, 111% at TEB and 110% at
Denizbank.
Capital ratios are adequate considering risk profiles, with
Fitch core capital
(FCC) representing 14.9% of Finansbank's risk weighted assets at
end-2012, in
keeping with a client base focused on higher risk segments. TEB
and Denizbank's
FCC ratios were 11.5% and 10.1%, respectively.
RATING SENSITIVITIES - VRs
The three banks' VRs are now at the same level as the Turkish
sovereign's
Long-term foreign currency IDR ('BBB-'/Stable). Upgrades of the
VRs without an
upgrade of the Turkish sovereign are therefore unlikely, given
their mid-sized
franchises, the already investment grade level of the ratings
and moderate risks
arising from continued growth in a more challenging operating
environment.
The VRs could be downgraded if there was a marked slowdown in
the economy, signs
of significant deterioration in banks' asset quality or
underwriting, or a clear
deterioration in leverage and/or performance as the banks
continue to grow.
KEY RATING DRIVERS AND SENSITIVITIES - SUPPORT RATINGS AND
SUPPORT RATING FLOORS
TEB and Denizbank's Support Ratings of '2' reflect Fitch's
opinion that there is
a high probability that the parent banks will support their
subsidiaries should
the need arise. Near-term changes in these ratings are unlikely
given the
shareholder ratings and the current level of the Country
Ceiling.
Fitch rules out support for Finansbank from NBG considering the
latter's
currently weak ability to provide support. Finansbank's '3'
Support Rating and
'BB-' Support Rating Floor reflect Fitch's view that there is a
moderate
probability of support from the Turkish government, if required,
given the
bank's systemic importance. The rating could be downgraded in
case of a
multi-notch downgrade of Turkey, which Fitch views as unlikely.
The rating actions are as follows:
Finansbank:
Long-term foreign and local currency IDRs: affirmed at 'BBB-'
with Stable
Outlook
Short-term foreign and local currency IDRs: affirmed at 'F3'
Viability Rating: affirmed at 'bbb-'
Support Rating: affirmed at '3'
National Rating: affirmed at 'AAA(tur)' with Stable Outlook
Support Rating Floor: affirmed at 'BB-'
Senior unsecured long-term debt: affirmed at 'BBB-'
Denizbank:
Long-term foreign and local currency IDRs: affirmed at 'BBB-'
with Stable
Outlook
Short-term foreign and local currency IDRs: affirmed at 'F3'
Viability Rating: affirmed at 'bbb-'
Support Rating: affirmed at '2'
National Rating: affirmed at 'AAA(tur)' with Stable Outlook
Turk Ekonomi Bankasi:
Long-term foreign currency IDR: affirmed at 'BBB' with Stable
Outlook
Long-term local currency IDR: affirmed at 'BBB+' with Stable
Outlook
Short-term foreign currency IDR: affirmed at 'F3'
Short-term local currency IDR: affirmed at 'F2'
National Long-term rating: affirmed at 'AAA(tur)' with Stable
Outlook
Viability Rating: upgraded to 'bbb-' from 'bb+'
Support Rating: affirmed at '2'
Contact:
Primary Analyst (Finansbank and Denizbank)
Janine Dow
Senior Director
+44 20 3530 1464
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
Primary Analyst (Turk Ekonomi Bankasi)
Banu Cartmell
Director
+44 20 3530 11 09
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
Secondary Analyst (Finansbank and Denizbank)
Levent Topcu
Director
+90 212 284 7819
Secondary Analyst (Turk Ekonomi Bankasi)
Janine Dow
Senior Director
+44 203530 1464
Committee Chair
James Watson
Managing Director
+7495 956 6657
Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153,
Email:
hannah.huntly@fitchratings.com.
Additional information is available at www.fitchratings.com.
Applicable criteria, 'Global Financial Institutions Rating
Criteria' dated
August 2012, 'National Ratings Criteria' dated January 2011,
'Rating Financial
Institutions Above the Local Currency Sovereign Rating' dated
December 2012 and
'Rating FI Subsidiaries and Holding Companies' dated August 2012
are available
at www.fitchratings.com.
Applicable Criteria and Related Research
Global Financial Institutions Rating Criteria
here
National Ratings Criteria
here
Rating Financial Institutions Above the Sovereign
here
Rating FI Subsidiaries and Holding Companies
here
Additional Disclosure
Solicitation Status
here
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